Ryan vs. Obama

Joseph Vanden Plas, Senior IB Editor, is our strongest voice on the political front, and he writes on a wide variety of subjects, most of which are directly pertinent to economic development circles. He holds public officials accountable, and explains the larger playing field when a special interest group is involved.

Taking the temperature of various members of Congress after U.S. Rep. Paul Ryan announced his controversial 2012 budget plan, which is really a plan for the next 50 years, I was dismayed but not surprised. Then President Obama stepped up to the plate with his own plan, and while it might be too much to ask that the 2012 presidential race comes down to Obama vs. Ryan (the political junkie in me relishes this rhetorical clash between two young, energetic, and engaging pols), their competing visions should give the American public the contrast it deserves.

As Ryan notes, the economic calamity of September 2008 took us by surprise, but the very real possibility of a debt crisis is predictable. At the rate the federal government is spending money – this year's deficit is a projected $1.5 trillion, and our total national debt has reached $14 trillion – we're cruising for an economic bruising. Perhaps the saddest part is that we're doing this to ourselves. Foreign adversaries simply have to watch.

Ryan's "Path to Prosperity" seeks to reduce projected spending by $6.2 trillion over the next decade, mostly by cutting entitlements for the wealthy and allowing them to grow – yes grow – at a more moderate pace for everyone else.

While Ryan would simplify our tax rate structure, the President would cut deficits by $4 trillion through spending and deficit targets and by increasing tax rates for the wealthy, and therein lies the contrast. Ryan says we don't have a tax problem, we have a spending problem. Obama says the Bush tax rate cuts helped create the debt monster and argues that a balanced approach is needed to kill it.

Both have critics in their own parties. Many Republicans think Ryan doesn't go far enough, and they have their own ideas to balance the federal budget sooner. Obama's spending plans, which would be carried out over 12 years, make some in his party cringe. Both men take risks, but both are trying to claim the crucial group of independent voters who decide every election. These are voters who are aware that plunging the nation's people and businesses toward a future of austere budgets and massive tax increases, the inevitable result of a debt crisis, is still avoidable.

Although he doesn't really address the financial health of Social Security, Ryan has given us plenty to think about with regard to entitlement spending. On Medicare, he would replace the current fee-for-service system with a premium-support plan that allows seniors to take a predetermined amount of government dollars and shop for insurance. This piece has been met with serious criticism by the Congressional Budget Office, which claims it would raise the price of coverage because private insurance carries higher administrative costs. Ryan says it would force private plans to compete for those dollars, including on price.

Obama would control Medicare spending through a mechanism already established in the new health care law – the Independent Payment Advisory Board.

On Medicaid, Ryan would send block grants to the states and encourage them to experiment with more cost-effective care delivery, including home-based care that states like Rhode Island, which was granted a federal waiver, have had some early success with. Ryan believes the federal government should grant waivers to other states, including Wisconsin, which faces a $153 million Medicaid shortfall, so they can craft their own Medicaid solutions. But there is a real difference of opinion on the merits of such waivers between Ryan and the President. Let the debate begin.

We send people to Washington to solve problems, not watch them unfold before our very eyes. While each has his critics, we owe Congressman Ryan and President Obama many thanks for attempting to address this crisis head on and for giving us a choice of competing visions. They have set the table for a necessary dialog.

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